What is A Marketplace Platform?

What is A Marketplace Platform?

Today it’s hard to imagine the times when online shopping was a mere dream. But soon after the first retail transaction over the Internet was made, the progress was unstoppable. Online marketplaces started mushrooming all around the globe… or better to say around the net.

The basic aim of such an e-commerce business is to provide a secure environment for buyers and seller to exchange their goods and/or services. The number of companies operating in this sector of the economy has massively increased over the past few years. That’s why it is important to take note of all the principles for building an online marketplace that outplays the competitors. One of the things on that to-do list is choosing the right marketplace platform.

What are the main options?

There are different types of online marketplaces, but they all fall into two major categories — horizontal and vertical platforms.

Horizontal platform

Horizontal marketplace offers products in multiple different categories. The world-renowned leaders of this segment are Amazon and eBay.

OLX is another horizontal e-marketer. It is a classifieds platform for buying and selling goods, that belong to ‘electronics & appliances’, ‘fashion’, ‘furniture’, ‘mobiles’, ‘pets’, ‘cars’, ‘bikes’ and ‘books, sports & hobbies’ groups. You can also browse job vacancies, rent properties or exchange used goods or services on their website and mobile app.

Horizontal marketplaces present themselves as a one-stop shop that caters to different customer needs. It’s like a huge department store, which is right there in own your pocket. You only need a smartphone to start shopping.

Vertical platform

Vertical marketplace concentrates on the specific type of products. These platforms are built around that one single problem their clients have. Take Airbnb or BlaBlaCar as examples. The first one is helping people to find short-term accommodation while the later is a carpooling service that connects drivers and passengers travelling to the same destination point. Even though these platforms address one issue, the solutions they provide often come from various sources.

Since vertical e-commerce businesses focus on one industry, they can cover that segment from top to bottom. That enables them to present their products better, allowing customers to learn more about the peculiar characteristics of desired items. This also helps verticals to create a unique and personalized shopping experience for their buyers.

Since they work with one product class, they tend to attract quality sellers with deeper expertise. Eventually, that might even make them a ‘category killer’, as it is a strong competitive advantage over other market players.

Horizontal vs. vertical marketplaces

If we compare these two models the first thing that we ought to mention is that in the horizontal e-commerce world prize-winners are already declared. They are simply too big to be confronted. There is not much space left (if any) for the potential horizontal giants to sprawl, which makes vertical platforms a tempting choice for the newbies on the online retail market.

This model has several advantages:

  • you can prevent your marketplace from being cluttered with unrelated goods/services;
  • it brings more value to users interested in the specific product category;
  • you can target niche markets.

Latest tendencies in marketplace development

Global expansion

Recent years saw a new platform type starting to emerge — the global one. Global marketplace is an e-commerce platform where participants come from all over the world. Such international environment allows buyers to choose from the broader range of products and allows sellers to scale up their business. On top of that, both parties get to explore new markets, which bolsters the odds of finding desired goods/reliable service providers or attracting new customers.

The perfect example of a global marketplace is eBay. It sells literally everything. You can buy/sell there some fancy stationery or the entire village in Tuscany. No matter if it’s brand new or vintage, trendy stuff or antique piece, mass-market or a rare collector’s item — if something exists, there’re high chances you are going find it on eBay. As of March 2019, the total number of listings on their website exceeded 1,2 billion. The platform connects over 182 million active buyers and around 25 million sellers from 190 markets.

The broad variety of listed items is what helped eBay to win points for popularity worldwide. As there are a lot of things being bought and sold, users can compare prices and obtain the best value. To find top deals they have to interact with their peers which turns the platform into a dynamic networking site. That’s what global marketplaces do — create an efficient trading ground for the community of people coming from different parts of the world.

Forming clusters

Another trend that is currently reshaping the online retail structure is the hybrid marketplace model. This type of marketplace is offering goods under own labels as well as providing a platform for other vendors to sell their merchandise. Such a symbiosis increases customer traffic by enhancing the product array, which makes the site more appealing to potential buyers.

Amazon is a typical hybrid marketplace. In 2018 it sold goods worth of $117 billion on its own, while around 2 million other sellers were using the platform. Last year sales of third-party merchants totalled $160 billion and out of that, they paid the marketplace operator $39.7 billion in fees. Well, Amazon has totally nailed it!

In fact, the future of e-commerce might lie in this approach. Big retailers are likely to evolve into hybrid marketplaces, as it already happened to Walmart. The company is giving established online sellers the opportunity to offer their brand or product collection on Walmart Marketplace website. This sort of partnership helped the U.S. retailer to gain access to a new audience, like Millennials and Gen Z and allowed third-party sellers to build their brand’s awareness by associating with a big name in the retail industry.

Hybrid platforms are forming constellations where the original brand exercises its gravitational pull on the potentially infinite number of satellite vendors creating a convenient shopping environment.

Marketplace platform is the core structure of the e-commerce business. When deciding which one suits your needs the best you have to ask yourself whether the market you are about to enter is large enough for you to scale up to the point you find rewarding. The answer would clearly point at a certain type of marketplace platform you have to develop.

This article was prepared with the assistance of Clockwise Software — custom web and mobile apps development company specializing in marketplaces, supply chain management solutions, support platforms, and sales/marketing applications.

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